MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING MONDAY, NOVEMBER 24, 1997 (5)
PROPERTY ACQUISITIONS / DISPOSITIONS
Colony Energy (SPEC 12 Listed)
Colony Energy Ltd. has entered into an agreement to purchase the entire working interest of its joint interest partner Pinnacle Resources Ltd. in the Rainbow Lake area of northern Alberta. This will increase Colony's working interest in a significant portion of its operations in this area to 100%. Colony is in the process of making arrangements to finance the cash purchase price of approximately $27,500,000. The acquisition will be effective November 1, 1997 and is scheduled to close by year end. The acquisition will increase current production by approximately 800 net bbls/day of light 38 degree API oil and will provide Colony with approximately10,000 net additional acres.
Colony recently announced another acquisition at Rainbow Lake pursuant to which it will acquire approximately 200 net bbls/day of light 38 degree API oil and 15,000 (10,000 net) acres of land.
After completion of these transactions and with current fourth quarter production coming on stream, Colony expects to exit the year producing approximately 2,500 boe/day, approximately 2,000 of which is light oil.
Colony expects to drill approximately 3 gross (3 net) wells, and 18 gross (13 net) horizontal re-entry wells in its winter drilling program in the Rainbow Lake area, making it one of the most active drillers in the area. Colony has a 100% working interest in the majority of these proposed wells.
Renco Resources Inc
Further to news releases of March 4 and July 11,1997, the Company has acquired three producing oil and gas properties in Oklahoma from Renard Resources Inc., a company controlled by the Company's President, Brian Fox. Two additional properties are also to be acquired, on completion of title work. The properties are to be paid for in stock of the Company at $0.33 per share, amount to be determined by independent engineering appraisal, based on constant dollar cumulative cash flow. The number of shares to be issued will be determined at a later date. The Company currently has approximately 18,689,643 outstanding shares.
Constellation Oil & Gas Ltd.
The company reports that the sale of its non producing heavy oil assets in the Cold Lake region of Alberta has closed. Proceeds from the sale will provide Constellation with working capital to fund a portion of its planned 1998 exploration and development programs and eliminate debt. Company production remains unchanged at 330 boepd, consisting of 200 barrels per day of oil and 1.3 MMcf per day of natural gas, an increase of 80 percent from the 1997 entry rate. Constellation will continue to offset its discovery at Marwayne South. In 1998, we will pursue exploration plays in Central Alberta and Saskatchewan in addition to ongoing exploitation of existing properties, which saw the company participate in drilling seven successful wells during the last six months.
INTERNATIONAL FRONT
Kappa Energy Company Inc.
Kappa Energy (Yemen) Inc., has signed a contract with Nabors Drilling to drill two wells on the Kappa operated Block 2 in the Republic of Yemen.Kappa Energy (Yemen) Inc., is the operator of Block 2 in the Republic of Yemen and presently holds an 80% working interest. It is anticipated that Kappa's first well on Block 2 will be spudded during the third week of December, 1997.
Seven Seas Petroleum Inc.
The company announced it successfully completed drilling operations on its El Segundo No. 2-E well on the Emerald Mountain project in Colombia, South America. The El Segundo No. 2-E well is located approximately 5 kilometers north of the previously announced El Segundo No. 1 discovery well and reached a total depth of 6,262 feet.
Preliminary analyses, including oilshows while drilling, indicate the well should be productive. The Upper Cretaceous Cimarrona formation was encountered approximately 510 feet structurally low to the Tres Pasos No. 1 well and approximately 1,168 feet structurally low to the El Segundo No. 1 discovery well. There was no apparent indication of an oil-water contact in the well.
Seven Seas further stated it is now production testing the Tres Pasos No.1 well and that the El Segundo No. 3-E located approximately 4.5 kilometers south of the El Segundo No. 1 discovery well is drilling ahead at a depth of 4,581 feet. Seven Seas also indicated that current plans are for the drilling rig used for the El Segundo No. 2-E well to be mobilized approximately 3.7 kilometers northwest to drill an Upper Cretaceous Cimarrona formation test well on the Rio Seco block to a projected depth of 6,500 feet.
GHK Company Colombia, a wholly owned subsidiary of Seven Seas, is the operator of the Emerald Mountain project. Seven Seas holds a 57.7% interest in the Emerald Mountain project which encompasses the Dindal and Rio Seco Blocks.
Kroes Energy Inc.
Kroes Energy Inc. has earned a 7.5% working interest in the 2.9 million acres contained in Blocks V, VI and VII offshore Cuba with the drilling of the Ana Maria #1 well. The well encountered significant hydrocarbon shows during drilling but did not produce oil or gas during testing. There was sufficient encouragement, however for the partners to plan an aggressive follow-up seismic and drilling program on the same structure for the summer of 1998.
Kroes has reached agreement in principal to convert its' 7.5% working interest to a carried interest. Under this carried interest Kroes will receive 4,875% of the revenue from production after deducting operating and capital cost recovery and government share. This is a significant step for Kroes as it will not be required to fund the cost of the extensive exploration program planned for these blocks, nor the development costs associated with discoveries. It will, however, be entitled to the 4-875% share of net revenue and will receive cash flow from the beginning of production as the production sharing contract limits the amount of cost recovery that can be claimed in each quarter.
Parkcrest Explorations Ltd.
The company announced that it has entered into an agreement with Colombian Hydrocarbons Ltd. ("Colombian") to study certain areas of Colombia with the ultimate intention of participating in an association contract. In the event that an association
contract is awarded by Ecopetrol, Parkcrest will be the operator and earn 80% working interest in return for carrying Colombian for 20% of the costs through to a declaration of commerciality. Colombian is managed by Norm Rowlinson, who has generated the exploration concepts in the current study area and who played a major role in the discovery of the Emerald Mountain oilfield in the Upper Magdalena Valley of Colombia.
1998 CAPITAL EXPENDITURE PROGRAMS
Ranger Oil
The company plans a capital expenditure program for 1998 of approximately U.S.$285 million, the largest in the Company's history.
Development expenditures account for two-thirds of the budget. Major projects include the Banff, Pierce, Columba 'E', and Kyle fields in the North Sea, the Kiame field in Angola and as well, a number of Canadian conventional and heavy oil projects. By the end of 1998 these developments should add over 40,000 barrels of oil production per day.
The remaining third of the budget will be on exploration. The 1998 program includes high-impact wells in the North Sea, Angola Block 4, Ecuador Block 19 and the Northwest Territories in Canada. In addition, over thirty wells are planned in the Western Canadian basin and in the U.S. Gulf of Mexico. Significant funds are also being directed at property and seismic acquisition in these and other areas. Together with new ventures, these will lead to continued expansion of international drilling opportunities in 1999 and future years.
It is also the Company's intention to dispose of a number of non-core properties, mainly in Canada, by the second quarter of 1998. Sales proceeds will likely fall in the range of US$50 to US$100 million.
SERVICE SECTOR
Inter-Tech Drilling Solutions Ltd.
The company announced record year-to-date results for the period ended September 30, 1997. During the first nine months of 1997 Inter-Tech's gross revenue increased 45 percent, EBITDA increased 70 percent, cash flow increased 71 percent and net earnings increased 151 percent over the same nine months in 1996. Inter-Tech's revenue growth during this period was a direct result of the company's positioning as a market leader in the rapidly expanding practice of underbalanced drilling within the oil and gas sector. The outlook for Inter-Tech is very optimistic. The activity in Canada is expected to continue with the Petroleum Services Association of Canada predicting 250 underbalanced wells to be drilled in 1998. Inter-Tech with its proprietary technology is well positioned to capture a large share of this underbalanced drilling market. Management expects further growth in the United States market. Inter-Tech's services are being contracted in new geographical markets within the United States where
underbalanced drilling has not been performed in the past. The positive outcome of these projects is expected to result in further market expansion and increased activity for Inter-Tech. Internationally, Inter-Tech's involvement in its existing markets continues to grow while new international projects are starting up. During the third quarter the company continued to earn revenue from drilling projects in the Middle east, the North Sea, South America and the Pacific Rim. In addition, equipment for the Colombian project has been assembled and mobilized to Colombia. Revenue from this project is expected to begin during the fourth quarter in 1997. While underbalanced drilling is still in its infancy in the international market we continue to see greater acceptance of the technology. Inter-Tech continued to receive positive results where it had supplied the equipment and expertise during the drilling of the underbalanced portion of several wells. These positive results, when combined with Inter-Tech's experience, reputation and equipment, are expected to lead to contract extensions, additional multi-well projects and the accelerated development of new underbalanced drilling markets.
In September 1997, Inter-Tech entered into an agreement to acquire all of the shares of Big D Rentals & Sales (1981) Ltd. (Big D), a well-established oilfield equipment rental company. The acquisition gave Inter-Tech immediate access to specific complimentary equipment. As the company expands internationally, Big D is expected to enhance Inter-Tech's ability to provide more equipment and generate additional revenues from drilling projects. The acquisition of Big D is expected to add $7.5 million to Inter-Tech's 1998 revenue and increase earnings per share by $0.06. The acquisition is subject to regulatory approval and is expected to close in December 1997.
Request Seismic Surveys Ltd.
Corporation has entered into a seismic data management agreement with Wascana Energy Inc. ("Wascana") which provides that, effective December 1, 1997, Request will manage Wascana's seismic database which consists of approximately 47,000 two dimensional ("2-D") and three dimensional ("3-D") seismic lines. The agreement with Wascana represents Request's largest seismic data management agreement to date. Request provides access to seismic data information to customers within the oil and gas industry. The Corporation manages seismic information for sale purposes on behalf of other companies, acts as a broker to facilitate the licensing of seismic information between vendors and purchasers and creates, markets, and supervises the acquisition of new seismic data inventory. The Corporation generates revenues via commissions charged for its brokerage and management services as well as the licensing and sale of proprietary seismic data within its seismic inventory.
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